Germany's Merz says EU ready to defend industry against 'unfair' Chinese trade

The EU wants to protect industries it believes face unfair competition from China. Merz points to Chinese overcapacity, subsidies and export advantages linked to an artificially cheap currency. The goal is fair trade, while ensuring European producers can compete and survive.

The article does not name each planned instrument. It says EU officials have discussed measures and reached an agreement to reduce the number of cars exported to the European market. Merz also says the EU will introduce a new set of trade-defence instruments.

Merz insists these steps are not the beginning of a trade war. They show, however, that Germany, France and the wider EU are prepared to restrict or respond to trade practices they consider harmful. The approach combines negotiations with China and stronger protection for EU-based industry.

Trade-defence instruments are government measures used when imported goods are judged to gain an unfair advantage. They can respond to subsidies, unusually low export prices or other practices that harm local producers. Their purpose is to restore fair competition, not automatically to stop all imports.

Common examples include extra duties, import quotas and negotiated limits. A duty raises the price of an imported product. A quota limits how much can enter. The article gives one concrete example: EU officials reached an agreement to reduce the number of cars exported to the European market. It does not identify the full planned package.

These measures can discourage imports by making them more expensive or less available. They can also give European companies more room to produce and invest. However, they may increase costs for buyers and invite disputes, which helps explain why Merz stresses that the moves are not a trade war.

A trade surplus means a country sells more goods and services to another country than it buys from it. Merz says China’s total trade surplus with the European Union is well over €300 billion each year. That is the scale of the imbalance he highlights.

The figure covers China’s overall trade position with the EU, rather than one product or one national market. Merz connects the surplus partly to Chinese companies’ strength and excellent research, which he says Europe must respect. He also blames overcapacities, high subsidies and an artificially undervalued currency.

The size of the surplus matters because it intensifies political pressure for action. EU leaders, including Merz and French President Emmanuel Macron, have considered measures to protect European industry. Merz says the EU wants fair trade, while remaining ready to defend its interests through new trade-defence instruments.

Germany long relied on a large trade surplus, supported by industrial exports from its auto, chemicals and electronics sectors. The position has weakened in recent years. Chinese companies have become more competitive, while German exporters have faced rising production costs and US tariffs.

The changing balance is especially important because China was once a major destination for booming German sales. German companies now face tougher competition in markets where Chinese firms can offer increasingly competitive products. Merz also acknowledges that structural problems within Europe have harmed the German economy and weighed on exports.

This means Germany’s export difficulties have more than one cause. Chinese overcapacity, high subsidies and an artificially undervalued currency are part of Merz’s criticism. European structural problems and higher costs add pressure. Germany is therefore supporting EU action intended to protect industry while continuing to seek fair trade with China.

When the EU limits imports or adds costs, Chinese goods may become more expensive or harder to find. European manufacturers can gain protection from intense competition and may have more room to maintain production, invest and compete. This is the central reason supporters use trade-defence measures.

Consumers could face higher prices if cheaper imports disappear or become costlier. They might also see fewer product choices, especially if European suppliers cannot quickly provide alternatives. European manufacturers may benefit from stronger demand, but they could also face higher input costs when they rely on Chinese components or materials.

The article does not predict exact consumer or industry outcomes. It records the EU’s agreement to reduce car exports to Europe and Merz’s plan for new trade-defence instruments. The forward question is whether these measures create fairer competition without imposing excessive costs or provoking a wider trade conflict.

Industrial subsidies give companies financial support, such as help that lowers production costs or supports investment. Excess production capacity means firms can make more than their home market absorbs. They may then sell the surplus abroad, sometimes at very competitive prices. An undervalued currency can make a country’s exports cheaper for foreign buyers.

These advantages work through prices and supply. A subsidised producer can charge less while maintaining support. A factory with unused capacity may accept lower prices to keep production moving. A cheaper currency reduces the foreign-currency price of exported goods. Together, these factors can increase sales and pressure competitors.

Merz says China’s overcapacities, high subsidies and artificially undervalued currency contribute to its export strength. He also recognises strong Chinese companies and excellent research. The EU’s proposed trade-defence instruments are intended to address what Merz sees as unfair advantages, while preserving fair trade rather than ending trade.

A trade surplus is the difference between a country’s exports and imports with a trading partner. If exports are greater, the country has a surplus. Merz says China’s trade surplus with the EU is well over €300 billion each year, meaning China sells much more to the EU than it buys from it in total.

A surplus does not automatically mean trade benefits only one side. European buyers may value Chinese products, while Chinese companies gain sales and income. The EU may also export goods and services that China wants. Trade can therefore create benefits for both sides even when the value of sales is unequal.

The imbalance can still become politically difficult when it persists or is linked to subsidies, overcapacity or currency policy. That is why Merz calls for fair trade and EU protection. The article presents mutual benefit and stronger defence as compatible goals, not necessarily as opposites.